Policies of the Trump administration have increased the risk of Indian companies that have a significant exposure to the US market. For instance, the US emigration department has decided to stop issuing premium H1-B visa from 3 April 2017. Indian IT companies are the main beneficiaries of these premium visas.

Will they perform under pressure?IT, pharma, auto and auto components companies face pressure in the US market.

Competitive advantage enjoyed by Indian firms could help them withstand headwinds from the US.Figures normalised to base of 100

Also, there are several Bills pending in the US Congress that aim to restrict the grant of H1-B visas in the future. “While some Bills propose increasing the minimum salary (for granting H1-B visa) from $60,000 per annum to $1-1.3 lakh per annum, others demand restricting foreign workforce to 50%,” says Sandeep Nanda, CIO, Bharti Axa Life Insurance.

IT and pharma face pressureDespite the likely headwinds, Indian IT stocks have not seen a negative reaction from the market. Experts say the visa issue is unlikely to significantly impact the Indian IT industry. “The H1-B priority visa stoppage is not a big issue,” says Nanda. Ajay Bagga, Executive Chairman, OPC Asset Solutions concurs: “It’s just the 15-day premium visa processing programme that is gone.

The only issue is that now the companies will have to plan their assignments in advance.” Even on the issue of the proposed legislation that seeks to check the grant of H1-B visa by raising the minimum salary requirement— thus making it difficult for the companies to send workers to the US—experts advice not to panic. “We need to see which of these Bills get passed,” says Nanda.

Analysts are optimistic that Indian firms will be able to face the pressure from the likely stricter regulations in the US.Data compiled by ETIG Database. *% of overall revenue based on March 2016 data

The problems are not restricted to the IT industry alone. The US FDA is becoming increasingly tough with its inspections of Indian pharma facilities. “The frequency of inspection has increased with the US FDA increasing the number of inspectors in the last 2-3 years,” says Nanda.

In the case of pharma too, experts do not see too many problems. “Things are improving on the US FDA inspections front and they should get better in the next one year. However, the facilities that were suspended may take 24-36 months to get fresh approvals,” says Bagga.

Pricing pressure of generic drugs in the US is another problem faced by Indian pharma companies due to increased competition. So, how should investors view these two big export-oriented sectors?

Experts say remain positive. “Indian pharma companies have a clear competitive advantage and high return on equity. The sector can be treated as a contrarian bet. I am bullish on both pharma and IT,” says Bagga.

Sectors to watchWhat about other companies with a large exposure to the US market? Cries for a border adjustment tax—similar to import duty—have gained a high pitch in the US. However, experts rule out any blanket increase in import duty, because of its negative impact on the US consumers.

Any hike in duty or levy of a border adjustment tax will lead to the US consumers paying more for the same products. Also, the US companies, reliant on imports will see their cost of production rise. “Instead of a blanket levy of border adjustment tax or other forms of import duties, the Trump administration may target countries with high import duty and pressure them to bring it down to make US exports easier,” says Deepak Jasani, Head of Research, HDFC Securities.

This is worrisome for countries like India which have a very high import duty structure. Also, we have a large trade surplus with the US (taking into account services export). The Trump administration may focus on procedural issues, such as H1-B visa, to force cutting import duty and thus bring down this surplus. This means auto component companies such as Rico Auto that generate a decent revenue from the US market, may come under pressure.

Global auto majors like Tata Motors, which generate a good revenue from the US, but do not have a manufacturing base there, may also come under pressure. Here again, experts say most companies—particularly, textiles,gems and jewellery, leather, etc.— will not be affected in a big way. “The US doesn’t have a skilled work orce in the gems and jewellery space and large textile production is not practical because of high labour costs,” says Bagga.

This means the textile companies like Himatsingka Seide and Trident, which earn a large income from the US, are reasonably safe. The leather exporters too should not face much trouble. “I am less worried about the leather sector because India has the largest livestock and it is largely present in mid-to -low value exports,” says Jasani